JUNE 2003 • ASIA DIVISION Governance and participation in Laos Acknowledgements The Study Team received excellent cooperation and assistance for this report from the Committee for Planning and Cooperation (CPC) and the Department of Public Administration and Civil Service (DPACS). Their efficiency and effectiveness in helping the study team to organize the diverse consultations is but one example of their improvements in Good Governance practices. We thank the several hundred citizens, both civilians and officials, who took time to share with us their thoughts. We hope we have reflected their comments correctly. We thank Vice-Minister Khempheng Pholsena and Mr. Pheng Intharath of the CPC, Dr. Phankham Viphavanh, Vice-Minister to the Prime Minister and Mr. Khammoune Viphongxay of the DPACS for their facilitation on this study. Without their support, the process would not have been so fruitful. We especially thank Mr. Khampan Sivongsay, who helped us to arrange field visits and central level meetings. He introduced us so graciously and so often during our four weeks of intensive work. His efforts added much to our understanding. We wish him well in his tasks of working with local administrations. We thank Christer Holtsberg, Klas Rasmusson, Lisbet Bostrand and the Sida staff in the Lao PDR for having the confidence that we could do this study in a participatory and consultative manner. 1 Published by Sida 2003 The Asia Department Author: PDA Chagnon, Rumpf, Van Gansberghe, Binh Printed by Elanders Novum AB, 2003 Art. no.: SIDA2743en 2 Table of contents Acknowledgements ....................................................................... 1 Abbreviations ............................................................................... 5 Executive Summary ...................................................................... 7 1. Purpose, Parameters and Methodology .................................... 17 1.1 Terms of Reference of the Study ............................................. 17 1.2 Method of Gathering Information ........................................... 18 2. Changes in the Lao Context 1998–2002 .................................. 20 3. Context of Governance ............................................................ 24 3.1 Decentralization of Government .............................................. 26 3.2 The Governance Role of the Party........................................... 34 3.3 Administration: Central, Provincial and District Governments ......................................................... 36 3.4 Legislation: the National Assembly ........................................... 42 3.5 Judiciary: the Court ................................................................... 45 3.6 Audits and Inspections .............................................................. 47 3.7 Lao PDR within ASEAN .......................................................... 47 3.8 Summary on the Context of Governance ................................ 48 4. Progress and Challenges in Good Governance .......................... 50 4.1 Strategy and Planning: Moving towards a Lao-led Process? ........................................................................ 50 4.2 Strengthening Civil Service Management ................................ 52 4.3 Inadequate Government Salary Structure................................ 55 4.4 Setting National Budget Priorities ............................................ 58 4.5 Public Revenue Collection ........................................................ 61 4.6 Promotion of Anti-corruption Measures .................................. 65 4.7 Enforcement of Laws and Regulations ..................................... 68 4.8 Development of Mass Media .................................................... 69 4.9 Publication and Dissemination of Government Information ............................................................................... 71 4.10 Consolidation, Rural Migration, and Relocation .................... 72 4.11 Equitable Delivery of Services to the Poor .............................. 74 4.12 Summary on Progress and Challenges .................................... 75 3 5. Development of Citizens’ Participation ...................................... 77 5.1 Civil Society in the Lao Context ............................................... 77 5.2 Emerging Civil Society Institutions .......................................... 78 5.3 Lack of a Civil Society Legal Framework ................................. 81 5.4 Citizen’s Participation in Development Projects ....................... 82 5.5 Gaps in Citizen’s Participation .................................................. 84 5.6 Summary Citizen’s Participation .............................................. 88 6. Considerations for Sida – GOL Cooperation .............................. 89 7. In Conclusion .......................................................................... 94 Annex 1: Itinerary of Consultations .............................................. 96 Annex 2: References .................................................................. 99 Annex 3: Plan to Develop and Improve Laws of the 5th National Assembly ................................................ 103 4 Abbreviations ADB Asian Development Bank ASEAN Association of Southeast Asian Nations CD Compact Disk DANIDA Danish International Development Assistance DDV District Development Volunteers DPACS Department of Public Administration and Civil Service EU European Union GDP Gross Domestic Product GOL Government of the Lao PDR GPAR Governance and Public Administration Reform IDA International Development Agency (World Bank) IMF International Monetary Fund INGO International Non-Governmental Organization IT Information Technology JICA Japan International Cooperation Agency Lao PDR Lao People’s Democratic Republic LCPAR Leading Committee on Public Administration Reform LP Luang Prabang LFNC Lao Front for National Construction LLU Lao Labor Union LNCCI Lao National Chamber of Commerce and Industry LWU Lao Women’s Union LYU Lao Youth Union MDG Millennium Development Goals MOF Ministry of Finance NA National Assembly NAFRI National Agriculture Forestry Research Institute NBEL National Bank Exterior Lao NGO Non-Governmental Organization NIH National Institute of Health NPL Non-Performing Loans NSC National Statistic Center OECD Organization for Economic Cooperation and Development PER Public Expenditure Review PM Prime Minister PPA Participatory Poverty Assessment 5 SIDA Swedish International Development Cooperation Agency SOE State-owned Enterprise SEP-DEV Sekong Ethnic People’s Development Project SOCB State-Owned Commercial Bank STEA Science, Technology and Environment Agency TOR Terms of Reference TOT Training of Trainers UDAA Urban Development and Administration Agency UNCDF United Nations Capital Development Fund UNDP United Nations Development Fund UNFPA United Nations Fund for Population Agency UXO Unexploded Ordnance VAT Value Added Tax VFM Village Forestry Management VUDAA Vientiane Urban Development and Administration Agency WASA Water and Sanitation Authority WB World Bank 6 Executive Summary “I believe that Good Governance and Good Development must go together. It’s like having two legs to help the nation move forward. We cannot stand very long on one leg nor move forward. Without our own two legs, we will depend on the crutch of foreign assistance too much.” — A Lao senior provincial official This quote captures the focus of this Study. It examines whether the two legs of Good Governance and Participatory Development are in place and propelling the People’s Democratic Republic (Lao PDR) forward. Prior to the 1990’s the Lao PDR seemed to be standing primary on its “development leg,” focused on building infrastructure and socio-eco- nomic projects, with minimal public participation. In 1990, the Govern- ment of the Lao PDR (GOL), with support from its international assist- ance partners, began to develop the rudiments for Good Governance and Participatory Development: the Constitution, legal codes, the Na- tional Assembly, the judicial branch, research institutes, the national auditing system, tax collection, and enforcement bodies. At the same time, other notable changes occurred such as acceptance of citizens’ participation in community development, discussions of sensitive issues in the media, and the modest emergence of a few civil society institutions. Increasingly, citizens began to press quietly for open- ness in public policy, increased media access, and the expansion of civil society institutions. Linked to strengthening Good Governance, the Prime Minister issued Decree 01 in 2001 to decentralize to the sub-national levels the functions of development planning, budgeting, tax collection and implementation. Now the challenge is how to synchronize the legs of Participatory Devel- opment and Good Governance, so that the nation moves forward. This study, commissioned by the Swedish International Development Cooperation Agency (Sida), will be used to prepare for the next five-year phase (2004 – 08) of Swedish-Lao cooperation. The study assesses the progress on strengthening Good Governance and Participatory Develop- ment in the Lao PDR since the early 1990’s. The study team kept in 7 mind that the Lao PDR, like many nations, is somewhere on a con- tinuum, moving towards Good Governance and Participatory Develop- ment. The study’s objective was to explore how far the nation has pro- gressed recently, and what might be reasonable achievement to expect in the near future.